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2023-08-31 19:38:10 CEST 2023-08-31 19:38:16 CEST REGULATED INFORMATION Linas Agro Group - Interim informationAB Linas Agro Group results for the 12 months of 2022/2023 financial year: challenges for agribusiness and recovery for food businessesConsolidated revenue of AB Linas Agro Group and its controlled companies (the Group) for the twelve months of the 2022/2023 financial year exceeded EUR 1,999 million and were 5% higher compared to the previous year (EUR 1,896 million).
Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) for the twelve months amounted to almost EUR 67 million, 49% lower than the previous year. Net profit fell by 74% to EUR 20 million.
"Challenges for agriculture and related businesses, recovery for food businesses" is how Mažvydas Šileika, the Chief Financial Officer of AB Linas Agro Group, described the year that ended. The Group sold 2.1 million tons of grains and oilseeds during the 12 months, the same as last year. Sales of compound feed, premixes, and raw materials for feed were 841 thousand tons, 2% less than the previous year. The total revenue of the Grain, Oilseeds, and Feed Segment grew by 3% to EUR 745 million in the period under review, while the operating profit decreased by 67% to EUR 16.8 million. "It was difficult to sell a poor-quality product in a falling market. Grain traders were operating in a bear market - for instance, the price of wheat, which accounts for 80% of sales in this segment, was 30% lower at the end of the period than at the beginning. Russia, which sells wheat at a lower price, was a major player in depressing the overall profitability of the business, pushing down cereal prices and premiums on the market. Grain grown in the Baltic countries in 2022 was of poor quality and not attractive to buyers, and had to be sold at a price discount, which resulted in a 19% lower gross profit on grain and oilseeds trading compared to the previous year," said M. Šileika. According to M. Šileika, although the demand for compound feed remained high during the period under review, there was a global downward trend in the consumption of feed materials, which led to an increase in their supply during the year, as well as to increased competition from Polish producers and pressure on prices. As the Group had previously purchased a significant quantity of raw materials for feed production at higher prices, the decrease in the selling price of feed impacted the overall profitability of the segment, as the gross profit of the feed business contracted by 50%. During the reporting period, sales of soybean meal and other raw materials remained stable or even increased, but sales and gross margins of feed-grade vegetable oil contracted by 60% and 63%, respectively. "Vegetable oil trading, normally a profitable business, has contracted due to the volatility and uncertainty of supplies from Ukraine, especially as the market price of vegetable oil was at a three-year low due to the fall in oil prices and reduced demand from major importing countries. However, we expect vegetable oils to remain a sought-after commodity," said M. Šileika. The Group's Products and Services to Farmers business grew 8% to EUR 416 million while operating profit fell by 79% to EUR 35 million. Sales of seeds, plant care products, and fertilizers grew by 6% to almost EUR 308 million. Revenues from the sale and rental of agricultural machinery, supply of spare parts, and servicing increased by 20% to EUR 98 million. Income from grain storage and livestock farm installation projects contracted by 15% to EUR 10 million. "The Products and Services to Farmers business has experienced several challenges, which I would describe as "negative expectations and constraints". In the fall, fertilizer prices shot up in the face of higher energy prices and uncertainty about the possible shutdown of fertilizer plants. At the time of fertilizer purchase, it looked as if they would continue to rise. Those expensive fertilizers had to be sold at fallen prices in the spring. They were sold at 10% less and at a very low profit, when typically, fertilizers generate a large part of the Segment's profit. Competition was also fierce in the spring in the other groups of products for crop production: only seed sales were better than last year, while gross profits in the plant care products and micronutrients trade shrank by 11% and 16%, respectively, despite a slight increase in revenues. Low cereal prices in spring meant farmers bought fewer inputs than needed for a good harvest. In the second half of the financial year, EU funding for tractors, harvesters, and plows was banned in the Baltic countries, severely affecting trade in these machines. However, sales in the first half of the financial year were so good that the annual figures for this activity are better than last year, with gross profit from the sale, rental, servicing of new and used agricultural machinery, and spare parts trade rising by 51% to EUR 14.6 million. Fearing a cold spring, dry weather, rising costs, more expensive financing, and falling grain and raw milk prices, a number of farms have slowed or abandoned investment in grain preparation equipment, which has seen sales shrink by 28% and gross profit fall by 9%," said M. Šileika. The Group's agricultural companies' revenues grew by 28% during the period under review and exceeded EUR 50 million. Operating profit decreased by 17% to EUR 12.5 million. "We sold 104 thousand tons of crop production, 14% more than last year. Crop production revenue grew by 45%, but due to an increase of almost 20% in the cost of production and a drop in grain procurement prices throughout the year, crop production profitability was lower than in the previous financial year, with gross profit falling by 10% to EUR 8.9 million. The general trend in market prices was unfavorable for all farmers throughout the period under review, except at the beginning of the financial year. We usually spread our risk and sell our production throughout the year so that some sales were at higher prices and others at lower prices. The market is rarely predictable, and in times of war, not at all predictable. The Food Segment, which includes the poultry and flour-related businesses, grew by 20% to EUR 416 million in the period under review. Operating profit was EUR 7.9 million, compared to a loss of EUR 1.8 million in the same period last year. "The production of poultry meat and poultry meat products has decreased by 10% compared to last year, as we closed the poultry slaughterhouse in Kaišiadorys last spring. The poultry business' revenues increased by more than 13% to EUR 296 million. Still production costs were also high due to the advance purchase of raw materials for feed and high energy costs in the cold season, so the gross profit of poultry farming shrank by 10% to EUR 15 million," notes M. Šileika. "It would be difficult to compare annual figures with last year's at the moment. In 2021, with Kauno Grūdai, many new activities were added to the Group, organizational transformations took place, and therefore, we reviewed and adjusted the allocation of activities to this segment. From the beginning of the next financial year, the allocation of activities between segments should be completed, and no further changes will be made. However, it should be noted that all the activities that will remain in this segment in the future have shown profitability growth, and, for example, the unprofitable veterinary supplies business has become profitable. Also, the profits of pet food and pest control services have shown growth," said M. Šileika. AB Linas Agro Group owns the largest group of agricultural and food production companies in the Baltic States, employing almost 5 thousand people. The Group operates along the entire food production chain from field to fork, producing, processing, and marketing agricultural and food products and providing goods and services to farmers. In July, the Group acquired a modern robotic plant in Širvintos (Lithuania) from AUGA group, AB, which is active in the production and sale of ready-to-eat food products; its main products are organic soups, curries, cereal dishes, and organic canned vegetables in packages- about 70 product names. Attached: AB Linas Agro Group Chief Financial Officer Mažvydas Šileika
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